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Target to Invest $7B Over 3 Years In Digital, Other Moves

Target plans to invest $2 billion this year, and $7 billion over the three years as it looks to boost its digital initiatives, support new brands and expand its smaller-store footprint, taking a page from the playbook of main competitor Walmart.

More than 100 smaller-format Target stores should be operating within three years, and another 600 locations will be refurbished over the period. Walmart by contrast has more than 650 such stores, with plans to open more.

“We’re investing to win share — not surrendering,” said Target CEO Brian Cornell according to a report in the Minneapolis Star Tribune, a reference to chains that have shuttered hundreds of stores like Macy’s, JCPenney and Nordstrom. “There will be winners and losers in this new era in retail. This plan is all about coming out on top.”

Cornell – previously the head of Walmart unit Sam’s Club – said the retail industry is seeing a “seismic shift” in buying trends as digital and the focus on pricing continues to overwhelm the brick-and-mortar business model.

Target executives warned there will be some financial pain during this retooling period. For instance, they signaled that same-store sales will likely see a low-single-digit decline in 2017 instead of an earlier projection of a 3% increase. Overall the news sent the stock tumbling 14% Tuesday, it’s largest one-day loss since 2008.

MCM Musings: Time will tell if these drastic steps will have the desired effect for Target, which until now has been able to avoid the kind of mass shutterings that have hit other major retail chains. Some analysts observed that these new measures aren’t anything radically different from what the company has been doing, other than the lower price strategy. But Target has proven to be an innovation leader, and its brain trust and operational team should be able to pull it off.

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Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?